The Fed is about to induce 3 years worth of rising unemployment by their own estimates, so the days of workers not needing to take crap jobs out of desperation will soon be at an end.
https://qz.com/2178359/the-fed-predicts-3-years-of-rising-un...
https://qz.com/2178359/the-fed-predicts-3-years-of-rising-un...
The odds they won't find an excuse to reverse course within 3 years seems low.
They talked about reducing the balance sheet for almost a decade and barely made a dent before more than doubling it during the Pandemic.
I will be shocked if in 5 years the Fed's balance sheet isn't substantially higher than it is now.
Everyone and their mother knew that printing money since 2008 was going to blow up one day. Technology and unsubstantiated sectors allowed them to print without repercussions for a while and the administration and them also tried to fool people into believing the inflation was transitory... Reckless idiots. And now wage labor is the one to suffer most.
4TT in spending for BBB? Uhhuh! Even Yellen said it was crazy.
You can't "predict" that something will cyclical will happen on some indeterminate timeline then claim success when it eventually does. Impactful actions have pretty immediate results. So if you "predicted" that the actions of 09-10 to have an effect, if effect didn't happen by like 2012, your prediction was wrong. The economy is way too complicated to predict out more than a few years because it's constantly undergoing major shifts and changes.
Inflation is being experienced globally, even in regions with little/no economic ties to the USA. And the USA is experiencing less inflation than in many other countries. This suggests that the underlying cause is external to the USA and whatever actions Americans are taking in response is more effective than what other countries are doing.
It was in plain sight as early as one year ago. The fed itself had signalled exactly one year ago (coincidentally) that they are preparing to tighten money supply in 2023 [1]. Of course they didn't anticipate Russian invasion of Ukraine and the ensuing supply shortage. But as far as cycles go it was clearly expected. Also, it was obvious if one had paid attention the fed rate history [2]. Interest rates were on the rise until COVID struck forcing both fed and treasury to increase money supply to prevent hardship to the people. Also, back in Nov 2021 fed had slowed down money infusion by reducing MBS purchase speed.
People don't realise the extent to which 2008 GFC continues to reverberate. 2010s were truly exceptional years where interest rates were kept artificially low and fed kept printing money through QE (e.g., MBS purchase [3]). It would be really absurd to expect fed to have kept creating money and as the last decade drew to an end something had to give just that COVID postponed the day of the reckoning. Make no mistake 2020s are going to be really harsh money supply wise; a generation of people are going to experience what tight money supply feels like.
[1] https://www.aljazeera.com/economy/2021/6/16/federal-reserve-...
Oil is priced in USD.
Time to start buying stock in Keynes.
Von Mises has been missing from proper economic discussions in academia for half a century. He predates when economics was a science, and was expected to produce things that matched the data.
Absolutely nobody with any actual training would take his name seriously in practice. Naming him in a non-critical is like mentioning Ivermectin - a red flag that everything you know about the topic comes from social media. You might as well bring up Dr Sebi.
What's really laughable is that academia thinks its policy prescriptions play no role in the ongoing economic mismanagement despite all evidence to the contrary and the predictions of the Austrian school. Your need to smear the name of Mises with unrelated controversies is also very telling. Why not let the theories speak for themselves?
They did. That's what the "doesn't match the data" part was.
It's just that you haven't ever actually studied this, and are trying to wing your way through fake criticism, the way the kid who never read the book does their book report.
Buzzer sound.
However, I should note that if it were up to me, I would accept inflation to save lives every single time. Without that relief, people would have died, starved, or gone into life-ruining debt. Inflation is unfortunate, but better than the alternative.
The way inflation is being used here is not what it has traditionally meant. Inflation, ie, too much total liquid cash, accompanied by super high prices for labor (and therefore goods) started secretly and dramatically a very long time ago. It's debated if it's the 60s, or some people say as far back as pre or post great depression. That runaway inflation is an old story and has become the norm.
The current definition of inflation is "whether the working class has enough money to feel secure." Which is something the market hates with a passion. The market wants all the money in the hands of the rich, so it can be in the market. The market wants cheap labor and an immobile workforce.
The market ALREADY thought that the workforce had too much money BEFORE COVID. So they were absolutely appalled at the idea of a stimulus. So what you are seeing described as inflation is really that. Cost of goods are up because of price gauging barrels of oil, which is intentional.
The measures taken to "reduce inflation" are actually to get money out of the workforce and back into the market.
If you want to look at inflation, look at how much money is being held by the 1%.
This is a lie being spread around. It's actually extracting stimulus back from the poor, making up for lost profit during COVID, and decreasing total employment.
The market holds more power in the price of oil than the fed does with interest rates. The fed and the market are teaming up to make up for any ground (in profits and operating cost) that was lost during COVID.
https://fred.stlouisfed.org/series/WM2NS
Such a fast increase in such a short amount of time is extremely unusual, perhaps unprecedented. There's nothing even remotely close to that instant increase since the dataset begins at the start of the 1980s.
And then the COVID jump didn't only make a huge increase by itself, but the slope of the graph permanently increased.
It's basic economics that if you do that to the money supply you will get a massive jump in inflation.
Why wouldn't it be better to look at the total monetary base?
M1 also shot way up: https://fred.stlouisfed.org/series/M1SL
The consequences of money printing are extremely basic and well known since antiquity. You get both inflation and, less well discussed but more important, consequent distortion of production in the currency zone as resources are reallocated to wherever the newly printed money enters the economy. The Edict of Diocletian was an example of this from Roman times [1].
Unfortunately, in the last few years we've seen something very disturbing. Central bankers, who are theoretically chosen for their command of economics, have become delusional about this and started arguing that actually money printing doesn't create inflation at all [2]:
"But the current Fed chair, Jerome H. Powell, has dismissed claims that the Fed’s money-printing is fueling today’s price spiral, emphasizing instead the disruptions associated with reopening the economy. Like his most recent predecessors, dating to Alan Greenspan, Powell says that financial innovations mean there no longer is a link between the amount of money circulating in the economy and rising prices."
This is economic illiteracy and sets us on the path to absolute ruin. If it were true then after the economy had "re-opened" (whatever that means) we'd experience deflation as prices re-adjusted back to their pre-pandemic norms, but no such deflation will ever happen, because inflation is "always and everywhere a monetary phenomenon".[3]
In my view it's all a part of the same package of social phenomena you might call "government expertise failure". Anywhere you have the perception of expertise (whether justified or not), you create people who are incentivized to abuse that perception. Governments are filled with technocrats who claim to fully understand and control large systems, but their statements and beliefs seem to have been departing from what's actually correct at an ever higher rate. We are now all paying the price for their delusions at the checkout.
[1] https://en.wikipedia.org/wiki/Edict_on_Maximum_Prices
[2] https://www.washingtonpost.com/business/2022/02/06/federal-r...
[3] https://www.heritage.org/budget-and-spending/heritage-explai...
So the answer is likely, a negligible amount. The increase in wealth among poorer people was most likely driven by stimulus money and a bit due to wage increases (which also favored the poor).
Their hands are in this. Corona has a role too, but so does the Fed and the admin. If instead of Biden and it were the Repubs, or, god forbid, Trump, imagine the headlines and finger pointing. we'd be getting --they'd probably be overshooting with their blaming, but we'd definitely see more blame at the foot of that administration and the Fed.
Over ten years.
Honest question: How are we supposed to maintain our civilization without some government spending?
Is climate change going to fix itself? Is our infrastructure going to modernize itself? We need to migrate to EVs and build out energy infrastructure.
What is going to happen to aging and disabled people? The current answer appears to be to have them live in the streets.
The country's 1% currently own 70% of the wealth. I think they can handle some taxation, especially when those taxes are going to be used to modernize our infrastructure.
You speak as if there is currently no government spending, which is bizarre.
> The country's 1% currently own 70% of the wealth
This wealth does not exist as specie unproductively hoarded in vaults or banknotes hidden by misers so as to deprive the rest of us of food and shelter. It is lent and invested in the hope of generating value. The wealthy could spend their wealth on caviar, yachts, hookers, and blow, but instead, they make it available to those who promise to do something useful with it. Even the government itself can raise money borrowing from the wealthy. You may have heard of government bonds, or perhaps even the federal deficit.
Who will build the EVs? Who will build the houses for the homeless? Who will care for the aging and disabled? It's not just a matter of money, or printing it and giving to the poor, the gasoline-burning, the aging, the disabled would not drive up prices.
Someone has to be paid to provide these things, and housing, vehicles, medical care already account for most of our economy. Everyone with the skill and desire to care for the aging and the disabled are already doing it. Everyone with the skill and desire to build houses and cars are already doing it. We have full employment. Inflation is rampant because too many dollars chase too few resources, both people and material. If the new round of COVID stimulus had passed or BBB had passed, there would be more dollars and less investment, but not more resources.
In order to build more EVs, which EV factories should be disassembled and auctioned off for tax revenue? In order to care for more elderly, what elderly care facilities should be closed and sold to land developers? To fund more solar panels, how much do we need to tax solar panels?
Most homeowners have been in their homes for a while, refinanced, and have benefited from a fixed payment for their home while wages have risen with inflation.
SWEs probably don't need worry about remaining employed, but the days of salary wars will be over.
It won't. Everyone involved in business dealing with physical goods knows it's a supply side problem.
Fiscal policy will do little to control inflation at this time. The Fed of course knows this.
Last I checked there seemed to be some correlation between a country's money printing and current inflation rates. That's not to say that a protion of the current inflation rate is not due to supply consitrictions, but I certainly not assume that is the only factor.
2) swiss government regulates the price of healthcare
3) Switzerland uses significantly less fossil fuels and aren't as effected by the war in Ukraine
4) Switzerland passed multiple laws over the past few years to reduce the cost of goods, including banning foreign companies from charging Swiss citizens more
The CHF has gained steadily on the EUR since the pandemic and is up about 10% since a year ago. That alone is going to offset a lot of the inflation.
I'm not sure how the swiss handled the lockdowns, if it was more "open" (like the swedes did) or if they shut everything down, but here (in slovenia), we shut a bunch of businesses down (most of the service industry, most of the shops, etc.) and the government basically paid freshly printed EU money to all those people to stay at home on a "paid vacation" (80% of the paycheck they'd otherwise get), which was great for them (and made them not-protest), but on the other hand, a great middle finger to the rest of the people, and the consequences of all that printed money, that we see now.
Hardly. The parent reminded me of other issues affecting inflation in the U.S. - things I would chalk up to a sub-omptimal reglatory/legislative environment, which has made a mess over the decades of health care, housing, energy, social spending, and taxes. Congress is somewhat disfunctional, and can't agree on fiscal policies that might help in our current situation. That leaves only the fed to intervene, as best they can. That's not a supply problem.
Also, how could injecting 7 trillion dollars directly into the economy not have an effect on prices? Supply and demand were both affected by the U.S. pandemic response, not just supply as you asserted earlier.
Are you saying that the 7 trillion dollars of money given to small business owners and as stimulas checks had no affect on prices?
If demand drops then supply stops being a problem.
The Fed has no control over fiscal policy. You mean monetary?
Desperation creates extremism. I don’t think the US is prepared for the monster it may unleash.
Are you on the right side?